IRS Commissioner Predicts Miserable 2015 Tax Filing Season

Taxes
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Internal Revenue Service Commissioner John Koskinen warned that close to half the people trying to reach the IRS by phone might not get through during the upcoming 2015 tax filing season. “Phone service could plummet to 53%,” he told an audience of tax practitioners at the AICPA National Tax Conference in Washington, D.C. today. That would be down from an already unacceptable 72% during the 2014 filing season. The average hold time projection: 34 minutes!

What’s to blame? Budget woes. “All we can do is try to maximize our services as well as we can; as well as we can is still going to be miserable. You really do get what you pay for,” he said. Koskinen’s remarks followed National Taxpayer Advocate Nina Olson who was even gloomier: “The filing season is going to be the worst filing season since I’ve been the National Taxpayer Advocate {in 2001}; I’d love to be proved wrong, but I think it will rival the 1985 filing season when returns disappeared.”

There are five key factors at play – complicating the upcoming filing season (that’s when you file your 2014 tax return). The IRS agency budget is the number one challenge, Koskinen said. The House has voted to cut the IRS budget for 2015 by $341 million, and the Senate has proposed to increase it by $240 million—that would still be 7% below 2010 funding levels. In the meantime, Congress keeps passing laws that the IRS has to implement, namely the Affordable Care Act (“ACA”) and the Foreign Account Tax Compliance Act (“FATCA”).

For example, Koskinen said the IRS requested $430 million in 2014 from Congress to implement the ACA but got zero, forcing it to take money out of enforcement and taxpayer services budgets. This will be the first filing season with two major provisions from the Affordable Care Act –the premium tax credit and the individual shared responsibility payment--on Form 1040. National Taxpayer Advocate Olson said she’s very concerned about the IRS receiving accurate information from the health exchanges. It won’t be the IRS’s fault, but taxpayers will likely put the blame on the IRS. Koskinen touted the web pages that the IRS has created to help explain the ACA tax provisions.

Olson expects that implementation of FATCA, which affects taxpayers with accounts overseas, will also cause trouble this filing season. A new withholding requirement will mean there will be an issue with taxpayers trying to get refunds back in a timely manner. “If they are overseas, who are they going to call? There is not toll free number,” Olson said.

Then there are the tax extenders, 50-plus laws whose fate is uncertain. Congress has vowed to vote on the future of these laws in the upcoming lame duck session. But Koskinen warns that if the uncertainty continues into December, it could delay the start of the filing season and delay tax refunds.

Another factor Koskinen ticked off complicating this year’s filing season will be that the IRS is implementing a voluntary oversight program for return preparers. He said he’s still pushing for a mandatory oversight program. In the meantime, there will be a page on the IRS web site with a database of qualified tax preparers, including unregulated preparers who chose to participate in voluntary education programs. Attorneys, CPAs and enrolled agents, who all have separate licensing requirements, will also be listed.

Is there any promising news? Taxpayers are flocking to the IRS’s Where’s My Tax Refund feature where you can click and track the progress of your federal refund. They’re also using IRS direct pay, a secure online option for making tax payments (I use it; it really is quick and easy).

In the future (“some years from now”) Koskinen evisions a complete online tax filing experience. Taxpayers would have an account online where you could log on securely, see documents the IRS has received on your behalf, see your previous filings, and if there is an issue with your return, the IRS would contact you immediately—not two or three years down the line. “It’s not illusory,” he inists, adding that once more activities are moved online, the agency could sustain itself without annual budget increases.

I'm an associate editor on the Money team at Forbes based in Fairfield County, Connecticut, leading Forbes' retirement coverage. I manage contributors who cover retirement and wealth management. Since I joined Forbes in 1997, my favorite stories have been on how people fuel...